Sept. 27, 2017 - Freedomain Radio - Stefan Molyneux
09:47
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| Hi everybody, Stefan Moly, Freedom Aid Radio. | |
| Hope you're doing well. | |
| Please check out the new book, The Art of the Argument, at theartoftheargument.com. | |
| So let's talk about value and money and time, all of the things that, well, we end up, because we're mortal, running out of. | |
| So, Basically, because we're all going to die, we're all going to pitch face forward into that endless six-foot-deep dirt nap, what we have to do, or what we're going to have an incentive to do, is to value things in the now rather than in the future. | |
| Now, because we value things in the now rather than in the future, we will pay extra to have something now rather than in the future. | |
| So you can, if you want, save up for 20 years and then go and buy a house. | |
| Or what you can do is you can borrow the money to buy the house, live in it for 25 years, and pay more. | |
| Now, if you pay more to live in the house, which is interest rates, okay, so you've lost some money, so to speak. | |
| But compared to what? Because if you need some place to live, and you need some place less nice or at least less expensive to live in order to save the money to buy the house, so although you're spending money on interest rates for your mortgage to buy the house, you're saving the money that you otherwise would have spent on an apartment or a little house or living in your van or whatever it is going to be. | |
| And so because we want things in the now rather than in the later, people can charge us for giving us money now, right? | |
| You can take out a car loan, you can have a car tomorrow, or you can save up for a couple of years and then buy a car. | |
| But then you have to spend money on the bus. | |
| So this question of interest rates, interest rates are a lot of, kind of confusing for a lot of people, but just think of them as the price of money. | |
| Or rather the price of gratifying your desires now. | |
| Rather than in six months or a year or whatever it is, right? | |
| So interest rates, just the price of money. | |
| And they serve an incredibly powerful function in the free market. | |
| Because the free market is a very delicate balance between saving and spending. | |
| Like, if everyone saves and nobody spends, well, the economy doesn't move too much. | |
| And of course, everyone has to spend because we all need to consume resources in order to survive. | |
| So we need food, we need shelter, and so on. | |
| Everyone has to spend, whether it's money or energy or time. | |
| And so, but if a vast majority of people save, then economic activity is going to slow down. | |
| Now, that's not a bad thing at all. | |
| If a lot of people save, it means that they are deferring their gratification. | |
| I mean, there was a time in my life where I had to pay off some debt. | |
| So what did I do? | |
| Well, you know, it's ramen noodles and newspaper coupon clippings and looking for two-for-one specials at the local sub shop and so on. | |
| I mean, that's what you have to do. | |
| Now, it's not like I'm going to spend the rest of my life in that monk-like, scrabbling existence. | |
| But what I'm going to do after I save for a while is I'm going to spend. | |
| Let's say that you're saving up to buy a car. | |
| Well, you save up, you reduce your consumption, but then you're going to spend it at some point. | |
| And so what's interesting is that when a lot of people are saving, Most entrepreneurs say, well, they're saving now, but they're going to spend soon. | |
| Because either they're saving because they want to splurge, right? | |
| They're creating an excess, or they're digging themselves out of debt. | |
| Now, if they're digging themselves out of debt, at some point the debt will be paid off, hopefully, unless you have an arts degree. | |
| And then what happens is they're going to resume their normal spending patterns, maybe even increase a little bit. | |
| So when there are a lot of people saving, it's a signal to entrepreneurs that they are deferring spending, which is going to come soon. | |
| Now, when a lot of people are saving, think of supply and demand. | |
| Assuming demand is constant, the more supply, the less the price, right? | |
| So if people are saving a lot of money, it means a lot of capital is accumulating in bank accounts and other places of savings. | |
| Now, when you have an excess of money to lend, right, the money that's put into the bank is generally lent out. | |
| When you have an excess of money to lend and not much demand for it, you have to lower the price. | |
| And that means interest rates go down when people save a lot. | |
| Because there's an excess of capital to lend and because people are saving rather than spending, or the majority of people, the consumers at least, are saving. | |
| Then the interest rates go down. | |
| Now, that's fantastic. | |
| Because if you're an entrepreneur and people are saving, it means interest rates are going to go down. | |
| That's a fantastic time for you to invest in your upgrades. | |
| If you look at sort of early on in the show, I liked a 240p webcam and some headset microphone for 20 bucks. | |
| And now, I mean, I can't even tell you, and it would break my tightwad Scottish-style heart to even tell you how much I've spent on upgrading the various things to run the show. | |
| Not just in what you see, but in servers and podcast delivery mechanisms, SSD drives around the world. | |
| I mean, it's some pricey stuff, let me tell you. | |
| But, you know, that's the only thing worse than not succeeding is succeeding financially in the short run. | |
| So... So here's what happens when interest rates go down because people are saving, it means that entrepreneurs or capitalists can borrow money cheaply to upgrade their equipment, right? | |
| So this is a perfect time to put robots in your assembly line, to do various upgrades, to go back to retrain, to upgrade the skill set. | |
| of your workers to explore a variety of things that are going to help you to capitalize on the upcoming demand when people stop saving and start spending and this is a very very powerful mechanism that interest rates provides a huge amount of information if you want to know how much people are saving in a free market not now there's no free market in money there's almost no free market in interest rates is all controlled money supply interest rates generally controlled by the government directly or indirectly so In a free market, | |
| you want to know, well, how much are people saving? | |
| How much are they deferring their spending? | |
| Well, all you have to do is look at the interest rate, and you'll see in general. | |
| And if you want to know how long people have been saving for, look at the historical interest rate. | |
| When the interest rate started to decline, people are saving more. | |
| So at a perfect time that you want to upgrade your factory, interest rates are very low in the loans which allow you to do it. | |
| Fantastic. Now, when people start spending instead of saving, when they've paid off their debts or they've saved up for what they want to splurge on and they start spending instead of saving, well then the amount of capital that's available to lend out to people, well that goes down against supply and demand. | |
| The demand for spending capital has increased and therefore the amount of savings capital has decreased and what that means is interest rates go up. | |
| Now that, of course, is a perfect sign to the capitalist to start cranking out his goods. | |
| Right? Interest rates are going up, which means people are spending. | |
| And you can have all of this without all of this central planning crap of GDP and, you know, month-over-month statistics. | |
| You just look at the interest rate. Again, because we don't have a free market in interest, this information is clouded, occluded, messed up, reversed. | |
| It's become politicized, which means it's only valuable to politicians and the crony capitalists. | |
| It's not valuable to the average entrepreneur in the free market. | |
| So interest rates start to go up. | |
| It means people are spending rather than saving. | |
| Fantastic. So the capitalist starts cranking out his goods. | |
| And he can be virtually certain that there's going to be a market for them, all other things being equal, assuming he's not making horse and buggy apparatus in the age of the flying car. | |
| then what's going to happen is people are going to start snapping up the extra goods. | |
| And this, you know, intergenerationally, you know, people have kids and then they retire or they go to school or they get married, they want to buy a house. | |
| So there's sort of waves that happen demographically, or at least there used to be. | |
| Now with immigration, the waves of demographics that allow for predictability and things like school planning and retirement planning and health care spending, all of that predictability has gone away. | |
| If you sort of think of the post-Second World War baby boom, you have a bunch of kids being pumped out and then there's a trough. | |
| And normally there'd be this pattern, this wave in a society without mass immigration. | |
| But once you get mass immigration, all of this stuff, because you get immigrants, especially with chain migration, you get immigrants from every age and so on. | |
| So once you kind of understand the power of interest rates in the free market to give you essential information about whether to save, whether to spend, both as a consumer and as an entrepreneur, it's very, very powerful. | |
| And of course, it's self-correcting, as all things in the free market tend to be. | |
| So as people save more, interest rates go down. | |
| Now, as interest rates go down, that is an incentive to switch from saving to spending because you can get loans at a cheaper rate. | |
| Now, if too many people are spending rather than saving, interest rates go up, which is now an incentive to put your money in the bank and reap the rewards of interest payments, which used to happen in a free market, rather than spend your money. | |
| Again, wonderfully self-correcting information, and it is all of this delicate ecosystem and this delicate balance that has been completely toasted, thrown aside, thrown under the bus, driven over, backed over, fried up as roadkill, and served in a statist restaurant. | |
| That is based on the destruction of central banking, of government control of currency, government control or influence over interest rates. | |
| These are all disastrous destructions of very delicate web of self-correcting mechanisms of information about savings versus spending, investment versus consuming. | |
| Very, very powerful stuff. | |
| And if we are to have a free market again in the future, This self-correcting balance would take out the business cycle, as it's called, and give us a much more even and sane kind of economy. |
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